The Consensus View Arising from the Recent Industry Discussion Is As Follows

MIPA has received several requests from members about the effect of the Goods and Service Tax (GST) when it comes into force on 1stApril 2015, and more specifically on which aspects should GST be charged to their clients.

The consensus view arising from the recent industry discussion is as follows:

·GST is exempted for a foreign associates’ services (imported services) except for when the corresponding IP application is Malaysian (and therefore consumed in Malaysia) or when such fees are not listed separately (without profit element) on an invoice to a client.

·GST will otherwise be applicable (standard-rated at 6%) to local agent’s professional service fees and expenses.

·The majority of the industry were of the view that GST is applicable (standard-rated at 6%) for a local agent’s professional service fees/expenses to foreign clients (also referred to as exported services). However, MIPA intends to seek an advance ruling from Customs on this matter as it falls within a grey area and there is a strong contention that GST for an agent’s exported services should be zero-rated.

·MyIPO has verbally informed us that GST is not applicable to their fees, presumably because government official fees are out-of-scope.

It is noted that the overall effect of GST applicability based on our current understanding is not identical to the existing Service Tax, but seems to be quite similar. Some other points raised:

·If an IP agent receives a Malaysian bill [e.g. RM100 + RM6 GST], which is to be subsequently invoiced to a client, GST is applicable to the net amount (without GST) [i.e. RM100] not the gross amount (with GST) [i.e. 106] if applicable, to avoid double taxation to the client.

·A tax invoice must be issued within 21 days of the service (to avoid criminal liability).This is a problem as for a foreign IP application, the associate’s bill may not arrive for several months after the application is filed. However, the time of supply is when the services arecompleted, so we are of the view that the 21 day period does not start until the reporting letter is issued to the client.

(a) Official / government fees / (b) local professional fees / expenses / (c) foreign agent professional fees / expenses
(1)
MY client
filing
MY application / No GST
(Out of Scope / Standard-rated GST (6%) / Standard-rated GST (6%)
(2)
MY client
filing
foreign application / No GST
(exempt)
[imported services] / Standard-rated GST (6%) / No GST
(exempt)
[imported services]
(3)
foreign client
filing
MY application / No GST
(Out of Scope) / Standard-rated GST (6%)
[exported services]
request advance ruling as may instead be zero-rated (0%) / No GST
(Out of Scope)
(4)
foreign client
filing
foreign application / No GST
(Out of Scope) / Zero-rated GST (0%) / No GST
(Out of Scope)

A full analysis is available to members by Email upon request.